From Marshall Hargrave: Donald Trump was expected to be a great thing for gold.
And he was, for a bit.
Gold traded at over $1,300 an ounce for the first time in eight months on the news of Trump’s presidential win.
However, gold prices have slipped by nearly 15% since the election. Gold is now down 40% from its peak at over $1,800 an ounce in 2011.
The Federal Reserve’s plan to boost interest rates three times in 2017 means that inflation might be kept in check for the near term, making gold less attractive. Thus, investors have recently been pulling money from gold funds, such as the SPDR Gold Shares ETF (NYSE:GLD) at the highest rate since 2013.
The news of rising interest rates and a strong dollar have been a near-term headwind for gold. However, in the long term we still have four years ahead of Trump as leader of the free world. That can bring about a lot of uncertainty and inflation. Some of Trump’s plans are highly inflationary, such as $1 trillion in infrastructure spending, and that is positive for gold.
Plus, gold will remain a solid hedge against any geopolitical issues that should arise with Trump in the Oval Office. With all that in mind, here are the three best gold stocks to own today:
Best Gold Stocks: Newmont Mining (NYSE: NEM)
Newmont Mining is one of the largest gold miners around with a $17 billion market cap. It pays a 0.4% dividend yield, but since the election, shares have fallen 11%. The beauty of Newmont Mining is that it’s one of the best low-cost gold producers around.
That means, even with gold at low prices, Newmont can still make money. Its cost of production has gone from close to $1,200 an ounce in 2012 to just around $900 today. With asset sales and future projects, Newmont hopes to get its sustaining costs down to $700 an ounce. At the same time, it’s boosting production with projects in Colorado and Australia, to take advantage of higher gold prices to come.
Best Gold Stocks: Barrick Gold (NYSE: ABX)
Barrick is one of the cheapest gold miners around, trading at 15 times next year’s earnings estimates. Like other miners, Barrick is down 17% since the election, making it one of the worst-performing gold miners.
Yet Barrick has been aggressive on reducing debt and cutting costs. It’s managed to remain profitable during weak gold price environments in the past. Barrick’s gold production costs are as low as $700 an ounce. With these low costs, Barrick has been able to consistently bring in free cash flow, helping it pay out a 0.6% dividend yield.
Best Gold Stocks: Goldcorp (NYSE: GG)
Goldcorp pays a 0.7% dividend yield and has one of the best balance sheets among gold miners. Goldcorp has fallen nearly 16% since the November election. Like Newmont, Goldcorp has been cutting its costs.
Goldcorp’s cost of production is now close to $800 an ounce. It has also been boosting its balance sheet and liquidity. That’s cash it plans to use to continue paying down debt. It already has one of the best balance sheets in its sector, as mentioned, with a debt-to-equity ratio of just 20%, well below the industry average.
Goldcorp can use its balance sheet to continue developing its pipeline for boosting production. Certain projects, such as Musselwhite in Ontario, will not only boost production but also lower its costs further.
In the end, gold prices are poised to move higher over the next four years. However, instead of investing in gold itself, why not invest in companies that are more in control of their own destiny, such as the gold miners? The three miners above are well-positioned to navigate the gold price environment going forward.
The SPDR Gold Trust (ETF) (NYSE:GLD) rose $0.28 (+0.26%) in premarket trading Friday to $107.87 per share. Year-to-date, GLD has gained 6.30%.
This article is brought to you courtesy of Wyatt Investment Research.